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The Big Investment Lie by Michael Edesess

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5Why Do We Give Golden Crumbs to Rich People?

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What makes people fall for these high fees? It could be a certain well-documented chink in their good sense.

Classical economic theory makes a lot of assumptions about people’s actions when their economic interests are at stake. It assumes, for example, that people act “rationally.”

Some of these rationality assumptions seem a little out of keeping with common sense. At the very least, they are in a strange sort of jargon. For example, suppose someone decides to go to a three-hour baseball game for $20 instead of working overtime for $30 an hour. Economic theory assumes the psychic benefit of attending ...

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